TheChek News Flow

Nikkei -1.48% Hang Seng +0.52% CSI +0.21% Shanghai +0.17%

Eur$ 1.0642 CNH 6.8395 CNY 6.8882 JPY 113.55 GBP 1.2112 CHF 1.0078 RUB 59.4414 WTI$ 52.40 +0.06%

S&P -0.33% EuroStox -0.30% FTSE -0.17% CAC -0.25% SMI -0.40%

Macro :

- Praet: ECB Policy Focused on Avoiding Fall Into Deflation Trap

- Mogherini: EU Countries Can’t Negotiate Bilateral Trade Deals

- ECB Bought Air Liquide, NN Group, Novartis Last Week: Analysis

- Spain Seals Agreement on Saudi High-Speed Rail Project

- Bank of Italy, ECB Said to Disagree on Monte Paschi NPL: Il Sole

Keep an eye on :

- ANA SM : Acciona Seeks to Buy Back Up to EU108.4m of Convertible Bonds

- AC FP : Accor In Talks With Investors to Sell HotelInvest, Valued EU6.6B

- AI FP : ECB Bought Air Liquide, NN Group, Novartis Last Week: Analysis

- ALO FP : Alstom Wins Metro System Order in Vietnam

- ALO FP : Alstom 3Q Orders EU1.02b, Sales EU1.66b; Keeps 2020 Objectives

- BATS LN : BAT Agrees to Buy Rest of Reynolds for About $59.64/Share

- IAG LN : British Airways to Cancel 1% of Flights During Jan. 19-21 Strike

- BEI GY : Beiersdorf FY Sales Meet Estimates, Co. Confirms Ebit Guidance

- CO FP : Casino 2016 Sales Miss Estimates as French Retail Slows

- COL SM : Colonial Buys Paris Building for EU165m

- DBK GY : Deutsche Bank May Withhold Bonuses for 90% Traders, Bankers: NYP

- DB1 GY : Deutsche Boerse May Add Analytical Tools, AI Features, CEO Says

- ENGI FP : Engie in Talks to Sell LNG-Terminal Operator Elengy to GRTgaz

- ENI IM : Eni, MIT Extend Energy Collaboration For 4 Years

- FCA IM : Italy Says It’s Responding Appropriately on FCA Emissions Case

- GM US : GM Said to Announce $1b in New U.S. Investment: CNBC/DJ

- GIVN VX : Givaudan Buys Activ to Strengthen Natural Flavour Solutions

- HSBA LN : HSBC Sees Softer Demand for Turkey’s Auto Companies in 2017

- LISP SW : Lindt 2016 Sales Meet Estimates; Sees Operating Margin Widening

- LHA GY : Lufthansa LSG Caterer to Cut 2,000 Jobs, FAZ Says, Citing Union

- NOVN VX : ECB Bought Air Liquide, NN Group, Novartis Last Week: Analysis

- UG FP : PSA Astonished by C4 Citroen Cactus Emission Study: Le Parisien

- RIO LN : Rio 4Q Pilbara Iron Shipments on 100% Basis 87.7Mt, Est. 86.8Mt

- RR/ LN : Rolls-Royce Settles Fraud Investigations for 671 Million Pounds

- RDSA NA : Shell to Sell Gabon Unit to Carlyle Later This Month, AFP Says

- SUBC NO : Subsea 7 Offers to Buy Remaining 50% of Seaway Heavy Lifting

- UBSG VX : UBS’s Weber Says Banks Need to Have Options to Deal With Brexit

- ZAL GY : Zalando 4Q Sales Miss Estimates, Adj. Ebit EU81m-EU104m

It’s turned out to be another strange day in Chinese equities following Monday afternoon’s sudden nosedive, with a sharp downturn for Shenzhen-listed stocks on Tuesday afternoon taking a U-turn so hard it has managed to push the bourse’s benchmark index well into positive territory.

The Shenzhen Composite Index was up 1.2 per cent at 1872.69 shortly before the close on Tuesday, clawing its way back from an afternoon dive that saw it drop as much as 1.5 per cent.

The Shanghai Composite Index registered a similar post-lunch resurrection, rising from an intraday drop of 1 per cent to be up 0.1 per cent in the final minutes of trade at 3325.21.

Both bourses had experienced a similarly sudden fall (sans rebound) on Monday afternoon after state media reported China’s securities regulator had approved 10 initial public offerings for the mainland’s “A-share” market.

Mainland-listed shares often spike markedly in the first day of trade, hogging the available cash on hand to investors and potentially prompting those without any to sell the stocks they already own in order to take part in the new listings.

However no such announcement preceded Tuesday’s rout-turned-rally, which saw broad gains across all segments of the Shenzhen composite ahead of the close and in Shanghai left only financial, real estate, telecoms and utilities with losses in the final minutes of trade.

Big Pharma’s Newest Headache: Rival Drugmakers

The world’s best-selling drugs face new competition

One of big pharma’s most lucrative markets is starting to attract a crowd.

Drugs known as TNF inhibitors, used to treat maladies such as rheumatoid arthritis, have long been among the industry’s best sellers. Major brands include AbbVie’s Humira, Amgen’sand Pfizer’s Enbrel and Johnson & Johnson’s Remicade.

These drugs have been a blessing for pharma investors. Analysts expect the medications will account for more than $8 billion in fourth-quarter drug revenue when the companies announce earnings starting next week. Humira, the world’s best-selling drug, regularly accounts for more than half of AbbVie’s total revenue.

But U.S. competition is set to heat up. That includes new branded drugs as well as biosimilar drugs—similar versions of complex biological drugs that sell for a discount to the branded version.

Pfizer and Celltrion launched a biosimilar for Remicade late last year at a 15% discount to the Remicade list price. The Food and Drug Administration has approved biosimilar versions of Enbrel and Humira, although those launches haven’t yet taken place. A host of competitors are developing biosimilars of their own.

Meanwhile, Sanofi and Regeneron are likely to bring their new rheumatoid arthritis drug, sarilumab, to market later this year. Sarilumab showed greater efficacy than Humira in one trial that Sanofi and Regeneron conducted.

There are reasons to think the incumbent products won’t immediately face a steep decline. For starters, legal challenges have delayed biosimilar launches. Amgen said last fall it doesn’t expect to launch its Humira biosimilar in 2017 as a result.

These drugs also have years of real-world treatment success to their credit. Doctors are comfortable with prescribing them. It remains to be seen whether doctors will prescribe biosimilars as freely.

And on the branded front, sarilumab is awaiting FDA approval for just rheumatoid arthritis. The older drugs are approved for several other major indications.

However, investors shouldn’t get too comfortable with the idea that the good times won’t ever slow down. As more competition hits the market, the temptation grows to offer more rebates and discounts to maintain market share. That can cause revenue to drop even if a given drug’s market share is held constant. These drugs are important enough to the industry that small dips in sales can hit share prices.

This risk isn’t merely theoretical. While a price for sarilumab won’t be announced until regulators approve the drug, Regeneron Chief Executive Leonard Schleifer told investors at a conference last week that to compete in such a well-established market, his company would consider using price “as a weapon.” Those comments came before President-elect Donald Trump vowed to crack down on high drug prices at a news conference.

At a moment when the health-care industry’s attention is focused on the murky future of health-care policy, investors shouldn’t overlook the potential risks posed by old-fashioned competition.

Naguib Sawiris, the Egyptian billionaire who made his fortune building a telecoms empire extending from Algeria to Pakistan, is behind a deal to create a £3bn London-listed gold producer.

His family has a large stake in Toronto-listed Endeavour Mining, which on Friday revealed discussions with Acacia Mining, a fellow Africa-focused gold miner, over a “possible combination”.

They are pushing for a merger of the companies to create a pan-African gold company with the scale to rival Randgold Resources, London’s largest gold producer, according to sources familiar with the talks.

“On the face of it this appears a sensible African-focused fit,” said analysts at Investec. “A merged company would be of a similar production scale to Randgold.”

Acacia’s assets are in Tanzania, while Endeavour produces gold from mines in Mali, Ghana and the Ivory Coast. Combined, the two companies would have annual output of 1.5m ounces compared with the 1.3m ounces Randgold is expected to produce this year. Randgold is currently London’s largest listed gold miner with a market capitalisation of £6.29bn

Shares in Acacia rose 5.07 per cent to 439.6p on Monday, valuing it at more than £1.7bn, while Endeavour’s shares were down 0.48 per cent to C$22.72. It has a market capitalisation of about C$2.13bn.

Analysts said a merger of the companies was likely to garner support from institutional shareholders on both sides of the Atlantic providing the terms of the deal were sensible and did not favour one set of investors over another.

Acacia is 64 per cent owned by Canada’s Barrick Gold, but the company is believed to be willing to sell, having said its stake is noncore.

“The biggest weakness in Endeavour’s otherwise very robust investment case is the relatively short mine lives versus Acacia, Randgold and Centamin,” said Peel Hunt analyst Michael Stoner. “Acacia’s long-life Bulyanhulu mine is therefore likely to be the core asset around which the company is built.”

Still, one potential stumbling block is Canada’s tax law, which can make cross-boarder transactions tricky to pull off because it crystallises a capital gains liability. One solution, bankers said, would be a dual listing for the merged company and to issue a new class of exchangeable shares in Canada.

Endeavour is led by Sébastien de Montessus, a former Morgan Stanley investment banker in London who also worked for France’s Areva Group, the nuclear energy company.

He previously ran the Sawiris’ La Mancha Group, which in 2015 swapped a controlling stake in a mine for a 30 per cent stake in Endeavour and board representation. Mr de Montessus was named chief executive of the company in May.

Bankers said the chances of another suitor emerging for Acacia were low. “Everyone in the industry has had the chance to buy the Barrick stake if they wanted to,” said one mining banker.

Pulling Retirement Cash, but Not by Choice

Baby boomers’ mandatory withdrawals from 401(k)s, IRAs and other tax-deferred retirement accounts start in full force this year, touching off a massive shift of cash

The largest generation in U.S. history has to start pulling its retirement money this year, kicking off a mandatory movement of cash that could total hundreds of billions in the coming decades.

U.S. law requires anyone age 70 ½ or older to begin annual withdrawals from their tax-sheltered retirement accounts and pay taxes on those distributions. The oldest of the nation’s 75 million baby boomers cross that threshold for the first time this month, according to a U.S. Census Bureau estimate of when that demographic group began.

The obligatory outflows from 401(k)s and IRAs are expected to ripple through the U.S. economy, the stock market and a money-management industry that relies heavily on fees from boomers’ tax-sheltered savings plans and assets.

Boomers hold roughly $10 trillion in tax-deferred savings accounts, according to an estimate by Edward Shane, a managing director at Bank of New York Mellon Corp. Over the next two decades, the number of people age 70 or older is expected to nearly double to 60 million—roughly the population of Italy.

Firms that manage 401(k) plans are trying to persuade clients to reinvest their withdrawals in other products rather than spending or donating the cash to charity. It’s another pain point for many traditional money managers already struggling to keep some clients from shifting into lower-cost index-tracking mutual funds.

Many hope to offset the required distributions with inflows from millennials, people in their 20s and 30s—who recently became the largest living generation, even though boomers, at their peak, were more populous.

Savers, meanwhile, are debating what to do with their cash as they wrestle with tax bills triggered by required distributions and worry about outliving their assets. On average, men and women who turned 65 in 2015 can expect to live another 19 and 21.5 years respectively, according to the U.S. Social Security Administration’s most recent life-expectancy estimates; those post-65 expectancies are up from 15.4 and 19 years for those who turned 65 in 1985.

Jack Weaver, a retired biopharmaceutical product developer, turned 70 in late 2015 and had to pay taxes on his first required payout of $31,000 last year. “It’s unwanted income,” he said. He reinvested the money, and says his wife plans to do the same when she takes her first distribution this year.

The rise of the 401(k) is inextricably linked with the surge in U.S. citizens born after the end of World War II. Boomers, defined by the U.S. Census Bureau as people born in the 18 years beginning in “mid 1946,” embraced tax-deferred retirement accounts and made them a widespread savings tool in the 1980s and 1990s. The plans largely replaced traditional pensions, and helped create a multi-trillion-dollar industry supporting hundreds of investment firms and financial planners.

Contributions to tax-deferred retirement plans outnumbered withdrawals through much of the 1990s and 2000s. That flow began to reverse as boomers entered their retirement years earlier this decade.

Investors pulled a net $9 billion from workplace retirement-savings plans in 2013, according to the Labor Department. In 2014 the withdrawals jumped to net $24.9 billion. Full-year information for 2015 from the Labor Department isn’t yet available, but large mutual-fund companies that manage the bulk of U.S. retirement assets say outflows continue to rise. Fidelity Investments expects 100,000 customers to take their first required distributions in 2017, up from 91,000 in 2016.

The withdrawals thus far are small when compared with the roughly $15 trillion parked in U.S. tax-deferred retirement plans, according to a September 2016 estimate by the trade group Investment Company Institute. Brian Reid, chief economist at ICI, said asset gains could help cover some of the amounts retirees would have to withdraw.

Still, distributions are expected to grow exponentially over the next two decades because of a 1986 change to federal law designed to prevent the loss of tax revenue. Congress said savers who turn 70 ½ have to start taking withdrawals from tax-deferred savings plans or face a penalty. Specifically, retirees who turn 70 ½ have until April of the following calendar year to pull roughly 3.65% from their IRA and 401(k) funds, subject to slight differences in the way the funds are treated by the Internal Revenue Service. Then they must withdraw an increasing portion of their assets every year based on IRS formulas. The rules don’t apply to defined-benefit pensions, where retirees get automatic distributions.

The penalty for not taking distributions on time is a 50% tax bill on funds the retiree failed to withdraw.

The required distributions could come as a surprise to many boomers, said Alicia Munnell, director at Boston College’s Center for Retirement Research. “Individuals look at the pile of savings and think that’s their whole nest egg, not that they’ll have to pay some amount of that to the government,” she said. “It’s a very big deal when people realize they only have two-thirds or three-quarters of what they thought they had.”

Bronwyn Shone, a financial adviser in Pleasanton, Calif., said many of her clients aren’t aware of their legal obligation to take distributions. “I think some people thought they could let the money grow tax-deferred forever,” she said.

The outflows aren’t a surprise to most asset management firms, but they could force some dramatic changes. Firms will have to lower fees and offer more services to convince retirees to keep their savings at the firms, said Walt Bettinger, chief executive of brokerage firm Charles Schwab Corp. That would lower a firm’s profitability by raising costs per customer, he added.

Charles Schwab, which manages some $208 billion in 401(k) assets, typically has to move 10% of those funds around in any given year due to retirement, death or job changes. Mr. Bettinger expects that number to rise to 15% because of required withdrawals. “A 5 point increment of trillions in assets is a big number,” Mr. Bettinger said. “What’s happening is providers are having to be more aggressive to fill the gap.”

A Schwab spokesman said the company lowered fees on 401(k) plans about two years ago, by offering more low-cost options in exchange-traded or target-date funds. “We have been anticipating fee competition in 401(k)s for quite some time,” he said.